The Reserve Bank of India (RBI) on Wednesday, July 14th, blocked MasterCard from adding new domestic customers, including debit, credit or prepaid card users, to its network. The ban comes into force on July 22nd. The supervisory measure was taken in exercising the powers granted to RBI in accordance with Section 17 of the Payment and Settlement Systems Act 2007 (PSS Act). With the RBI circular on the storage of payment system data of April 6, 2018, all system providers were instructed to ensure that all data (complete end-to-end transaction details / collected / transmitted / processed as part of the message / Money order) in relation to payment systems operated by them is stored in a system only in India.
MasterCard stubbornly stuck. Several private lenders such as HDFC Bank, Yes Bank, ICICI Bank, RBL Bank have connections with MasterCard for debit and credit cards. From July 22nd, however, banks will no longer be able to issue new cards in the MasterCard network. According to the London-based payment startup PPRO, MasterCard accounted for over 30 percent of all card payments in India. RBI had previously prevented American Express Banking Corp and Diners Club International Ltd from adding new domestic customers to their card networks from May 1 because they had violated data storage standards.
Data security: the main concern
The RBI, which reads the insurrection law to map service providers, appears to be in line with the government’s new regulations on e-commerce portals and social media websites. The common thread is, of course, if you want to do business in India you should obey Indian laws. But something more important is at stake in the card business – the security of financial data. The RBI is on time when it says that Indian users’ financial data must be stored in India, i.e. on servers in India. Otherwise, such data can become a matter of trade where anyone can access it for free or for a price.
The advent of co-branding has increased the possibility of one’s own financial information being circulated in a dangerous way to crooks and extortionists. These card systems make up 14 percent and 15 percent of the outstanding cards for Axis and ICICI, with the former patronizing MasterCard for its flip-card connection and the latter patronizing Visa for their Amazon connection. The multinational map service providers and multinational e-commerce firms can team up to prepare a meal from Indian data rooted on overseas servers. And up close, ‘Alexa’, who is a great help to housewives, is resented for her unobtrusive peeping tom role. That family powwows are being captured by him and quietly passed on to his remote data storage servers is indeed a disturbing development.
Leg to atamanirbhar
The loss of MasterCard would be the gain of Visa and the indigenous rupay. But despite its impressive card market share, Rupay remains a major debit card player as international payment gateways eschew his credit card. Visa will therefore fill the gap that MasterCard has left in the credit card sector. Be that as it may, the government’s goal is to ultimately oust the overseas card providers from their preeminent position, as there is a significant outflow of foreign currency for their commissions for their services, which is not exactly a rocket science. Local rupay has captured 58% of the card market (in terms of the number of cards issued), with the removal of the Merchant Discount Rate (MDR) acting as gravitas to make the switch in its favor. Mobile apps from our fintechs also make cards pro tanto superfluous. But it would be unfair to attribute its success to the fact that the RBI read the riot to the multinational card service providers. Security concerns are real.
Cyber ​​war too real to be ignored
It is now almost a matter of course that nuclear war is a thing of the past and cyber war is stronger. The alleged Russian hacking attack on the New York gas system recently, as well as the alleged hacking attack on BSNL data by the Chinese, are not just products of paranoia or the feverish imagination of overexcited minds. While hackers in particular, and the virtual world in general, don’t respect borders, people shy away from giving away their data on a tablet to those with bad intentions. The Chinese of all people shied away from buying Tesla electric cars because they suspected that the cars were secretly equipped with eavesdropping devices. Well, if the devil can quote the scriptures, he can also suspect devilish behavior from others !! The decisive point is whether it is done through brazen, secret hacking / eavesdropping or through the skillful use of data stored on servers, the bottom line is about compromises in data security.
Net-net, RBI’s tough stance kills two birds with one stone – and deals with data security problems and deals with domestic payment platforms.
Note:
S. Murlidharan holds a degree in CA and writes on business, tax and commercial law. The views expressed in the article are its own.
First published: IS
